How Much Fraud and Waste Actually Existed in USAID Programs?
Very little, based on the audit record. Audits of $10 billion in U.S. aid spending in Afghanistan (funded by USAID, State, Defense and Agriculture), one of the most challenging operating environments on earth, found a disallowed cost rate of just 0.3%. The examples cited to justify the USAID shutdown added up to a fraction of a percent of foreign aid spending, according to the Center for Global Development.
The primary justification given for shutting down USAID in 2025 was fraud, waste, and abuse. The claim was that the agency was riddled with corruption and that taxpayer money was being squandered. But what do the actual audit records, inspector general reports, and independent analyses show? This article examines the evidence from the people and organizations that were responsible for finding and reporting fraud in these programs, including a firsthand account from someone who spent nearly 20 years doing exactly that.
This article accompanies Episode 40 of The Dr Kumar Discovery, where Dr. Kumar interviews Keith Hourihan, who spent nearly two decades conducting fraud investigations and program audits across 45 to 50 countries for major USAID implementing organizations.
Dr. Kumar’s Take
This is the article I think people need to read most carefully, because the gap between what was claimed and what the evidence shows is enormous. The administration said USAID was wasteful and corrupt. The audit data from Afghanistan shows that 0.3% of spending was disallowed, in a war zone. Keith Hourihan was the person whose job it was to find fraud. He investigated 75 to 80 cases per year, and most of what he found were fake taxi receipts and inflated hotel claims. The few larger cases were caught by internal controls, the money was repaid by the implementing organizations, and the inspector general was notified. That is what a functioning accountability system looks like. Meanwhile, the Pentagon spent $93.4 billion in one month, including $15 million on ribeye steaks and $7 million on lobster tails, and nobody shut that down. If waste, fraud, and abuse is the standard for eliminating a program, it should at least be applied consistently.
The Audit Evidence from Afghanistan
The most rigorous publicly available data on fraud in USAID programs comes from the Special Inspector General for Afghanistan Reconstruction (SIGAR), which audited U.S. aid spending, including USAID awards, in one of the most fraud-prone operating environments in the world.
According to an analysis by the Center for Global Development, SIGAR conducted 284 financial audits examining $10 billion in spending under awards funded by USAID, the State Department, the Defense Department and the Agriculture Department through December 2024. Auditors questioned more than $540 million of those costs. The funding agencies, not SIGAR, decide whether questioned costs are disallowed. They had disallowed $31.33 million. An additional $27.98 million was awaiting agency determinations. Agencies had made efforts to recover nearly $30 million of the disallowed costs; SIGAR can only recommend recovery.
That translates to a disallowed cost rate of approximately 0.3% in a war zone. For context, this means that 99.7% of the audited dollars spent in Afghanistan, during active conflict, with all the logistical challenges Keith Hourihan described in the podcast, were not disallowed.
In Ukraine, a more recent area of U.S. foreign assistance, USAID Inspector General audits of nearly $500 million in spending by 12 implementing organizations found just $186,899 in questioned costs, with five of the twelve implementers receiving zero audit findings.
The Examples Cited to Justify the Shutdown
NPR and the Center for Global Development both examined the specific fraud examples the administration cited when justifying its decision to terminate USAID programs. The Center for Global Development found that most of the cited examples showed no evidence of fraud or abuse, and that together they accounted for a fraction of a percent of foreign assistance spending. NPR reported that administration officials had not offered documentation to back up several of their claims.
The former USAID inspector general stated publicly that fraud, waste, and abuse was not rampant at USAID, and that several of the examples cited by the administration were “completely made up.” NPR interviewed six USAID and State Department officials who said that the review process was, at best, surface-level, with administration staff searching for keywords like “gender” or “family planning” to identify programs for termination rather than conducting actual fraud assessments.
An Insider’s Perspective: 75 to 80 Cases Per Year
Keith Hourihan’s account in the podcast provides an unusually detailed insider view of what fraud actually looked like in these programs. As the head of internal audit, compliance, and investigations for major USAID implementing organizations, he averaged 75 to 80 reported cases per year. Of those, roughly 45% had credibility. And of those credible cases, most involved small-dollar items.
The most common types of fraud he encountered:
- Fake taxi receipts and inflated per diem claims: Staff claiming hotel stays they did not make or transportation costs they did not incur. Typically in the range of $60 to a few hundred dollars.
- Procurement manipulation: Vendors colluding to provide fake competing quotations, or procurement staff steering contracts to preferred vendors through rigged technical specifications.
- Ghost participants: Fabricated names on training attendance lists to pocket the per diem allowances.
- Salary kickbacks: Agreements between managers and staff where the official salary is higher than what the employee actually receives, with the manager pocketing the difference in cash.
- Product substitution: Delivering cheaper goods than what was ordered and invoiced, pocketing the difference.
Critically, Hourihan emphasized that when fraud was found, the implementing organizations paid the money back out of their own unrestricted funds and reported the issue to the USAID inspector general. This was not an optional gesture. He explained that organizations that failed to maintain rigorous internal controls risked suspension and debarment. He described how at least one major implementing organization, AED, was effectively put out of business after a procurement fraud case involving approximately $90,000, despite being one of the largest implementers in the world with half a billion dollars in annual revenue.
The Comparison That Matters
Dr. Kumar raised an important contextual point in the podcast: if fraud and waste are the standard for shutting down a program, that standard should be applied consistently across government.
In September 2025, the Department of Defense spent $93.4 billion on contracts and grants in a single month, the highest single-month spending by any federal agency since at least 2008 according to Open the Books. In the last five business days of September alone, the Pentagon spent $50.1 billion. The spending included $15.1 million for ribeye steaks, $6.9 million on lobster tails, $2 million for Alaskan king crab, over $225 million for furniture, and a Steinway grand piano costing more than $98,000.
That one month of Pentagon spending was more than twice the “over $40 billion” a year that the White House said USAID gave out. The examples cited against USAID added up to a fraction of a percent of aid spending. No comparable efficiency analysis has been applied to the September 2025 defense spending spree.
Practical Takeaways
- Audits of $10 billion in U.S. aid spending in Afghanistan, a war zone, found a disallowed cost rate of just 0.3%.
- The specific examples cited to justify shutting down USAID added up to a fraction of a percent of foreign aid spending, and most showed no evidence of fraud.
- In the podcast, former fraud investigator Keith Hourihan described internal controls at implementing organizations that caught fraud, with partners repaying misused funds out of their own budgets and reporting to the inspector general.
Related Studies and Research
- Lancet study projects 14 million preventable deaths by 2030 from U.S. foreign aid cuts quantifies the projected cost of the decision to shut USAID down.
- The economic return of U.S. foreign aid spending examines how 40% of foreign aid dollars circled back to the American economy.
FAQs
Was USAID really shut down because of fraud?
The stated reason was fraud, waste, and abuse, but the available evidence does not support this claim at scale. The former USAID inspector general publicly stated that fraud was not rampant. The Center for Global Development found that the cited examples added up to a fraction of a percent of foreign aid spending. Six USAID and State Department officials told NPR that the review process involved keyword searches for terms like “gender” and “family planning” rather than actual fraud assessments.
How does USAID’s fraud rate compare to other government agencies?
In Afghanistan, 0.3% of audited aid spending was disallowed. The examples cited against USAID added up to a fraction of a percent of aid spending. Meanwhile, the Pentagon spent $93.4 billion in the single month of September 2025, including millions on steak and lobster, and no comparable efficiency review was applied to that spending.
Did implementing organizations really pay back fraud losses out of their own funds?
According to Keith Hourihan, yes. In his experience, when fraud was discovered in programs managed by implementing organizations, those organizations repaid the misused funds from their own unrestricted budgets, not from USAID funds. They would then report the issue to the USAID inspector general and cooperate with any further investigation. The consequences of failing to maintain these controls were severe, he said, pointing to AED, a major implementing organization that was effectively put out of business after a single procurement fraud case.
Bottom Line
The evidence from inspector general audits, independent analyses, and firsthand accounts from fraud investigators consistently shows that actual fraud in USAID programs represented a tiny fraction of the budget. A former fraud investigator also described internal controls that caught cases and implementing organizations that repaid misused funds. The 0.3% disallowed cost rate in Afghanistan and the small scale of the cited examples do not support the characterization of USAID as a wasteful or corrupt agency. The gap between the political narrative and the audited evidence is significant.
Listen to Keith Hourihan’s full account on Episode 40 of The Dr Kumar Discovery.
Sources:
- Center for Global Development. “Thinking Through Waste, Fraud and Corruption in US Foreign Assistance." 2025.
- Special Inspector General for Afghanistan Reconstruction (SIGAR). Financial audit data through December 2024.
- NPR. “Clawing back foreign aid is tied to ‘waste, fraud and abuse.’ What’s the evidence?" July 2025.
- Open the Books. Pentagon September 2025 spending analysis. March 2026.
